Oil drops as US, Europe clash over debt crisis

Oil prices dropped Friday as the U.S. and Europe clashed over how to handle the debt crisis in Greece. Benchmark West Texas

Intermediate crude gave up $1.44, about 1.6 percent, to end the day at $87.96 per barrel in New York. Brent crude, which is used to price many varieties of foreign oil, lost 8 cents to finish at $112.22 in London.

U.S. Treasury chief Timothy Geithner is meeting with European finance ministers in Poland, which may suggest that the U.S. is growing more concerned about Europe’s direction. If the Greek government defaults, there is a potential for an economic ripple effect across the continent that could eventually reach the U.S.

A weakened global economy drives energy prices lower and the lack of a certainty about Europe has been pressuring the energy sector. Europe consumes about 18 percent of all crude produced globally.

The U.S. is now pushing for a more decisive solution. On Friday, European leaders pushed back, saying they want to postpone a decision on more Greek payouts until October.

There are issues in the United States, however, that are pushing down energy demand as well.

U.S. refineries will use less oil this month as they reconfigure plants to produce winter fuel blends. Refiners must use a different blend during warm summer months to reduce emissions.

Unemployment rates also rose in a majority of states last month, according to the Labor Department, and that will change how consumers behave, and likely how much energy they use.

And a private survey released Friday suggests that consumers are increasingly worried. The Thomson Reuters/University of Michigan’s consumer sentiment index said consumer confidence lifted slightly in September. But its reading on future expectations fell to its lowest level since May 1980.

At the pump, retail gasoline prices fell in the U.S. for the sixth consecutive day. The national average dropped by more than a penny overnight to $3.611 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is 87.7 cents higher than it was at this time last year.

In other commodities trading, heating oil fell 1.57 cents to finish at $3.0089 per gallon and gasoline futures were flat, finishing at $2.7841 per gallon. Natural gas lost 6.9 cents to end at $3.809 per 1,000 cubic feet.